Ownership interests secured in large smolt production in Finnmark and Rogaland.

Second Quarter Results 2017The harvest volume for the Grieg Seafood Group in Q2 2017 was 18 503 tons, up from 16 263 tons in the corresponding period last year, reflecting an increase of 14 %. Combined with higher prices this resulted in total operating income of NOK 2 030m, an increase of 21 % compared to the same period in 2016. EBIT for the Group before fair value adjustment of biomass was NOK 392m in Q2 2017, compared to NOK 312m in Q2 2016.EBIT per kilo in the period was NOK 21.20, up from NOK 19.20 per kilo in Q2 2016. The average spot price rose by NOK 3.60 per kilo, while GSF’s realized prices showed an increase of NOK 7.70 per kilo. The difference was largely due to higher contract prices. Costs was NOK 5.70 per kilo higher compared to Q2 2016. The challenging biological situation in Shetland has been a major contributor to the increase in costs.

Strategic prioritiesA stated goal is to reduce GSF’s cost level to the industry average, or lower. The company will also be aiming to increase production by 10 % annually in the period through 2020.GSF has an ongoing focus on improving operating efficiency. This involves both increasing production per plant and per licence, and reducing costs per kilo.One of the key steps being taken to increase production is to set out bigger smolt. This shortens the production time in the sea and reduces the biological risk. An increase in the number of smolt is also decisive to ensure future growth and lower costs per kilo.The company is planning to set out 26 million smolt in 2017, which is an increase of 28 % compared to 2016. After the first half-year GSF are on track on the plan. So far 10 million smolt have been set out.In order to achieve growth by increasing the yield per licence, greater locational flexibility is a key factor. This is therefore an ongoing focus of attention in our contact with local authorities.

Market developmentThere was some increase in salmon prices in Q2 2017, the only exception being the North American market where prices declined through the period. Fixed price contracts for Norway accounted for 18 % of sales in Q2 2017. This share is expected to be 32 % in Q3 2017. For 2017 as a whole, it is estimated that fixed price contracts will account for 25 % of the total. Work is also in hand pertaining to contracts for 2018.

OutlookThe supply of salmon is expected to increase in Q3 2017, which may put prices under pressure. However, in the longer term, there is no indication of changes in the strong market trend that has characterised the last few years. The harvest volume for Q3 2017 is expected to be 16 500 tons. The harvest volume for 2017 as a whole is expected to be 67 000 tons, which is 3 000 tons less than previously indicated. This must be considered in light of the biological situation in Shetland.